www.amchamchina.org

AmCham China 2013 American Business in China

White Paper

About the White PaperRepresents the views of:• Over 1,000 companies• Over 3,500 individual members

Process:• Working groups find consensus on key issues• Volunteer members with expertise draft initial content• AmCham China’s Policy Committee and staff edit and coordinate• Approval by Board of Governors

About the White PaperChapter composition• Business climate overview• Industrial policy and market access• Cross-sector issues• Industry-specific issues• Regional issues

Graphs/data that reflect member sentiment on business issues• Drawn from Business Climate Survey, which polled 325 of our members

across a broad range of companies (released in March)

About Business Climate Survey DataWhat it represents• Our Business Climate Survey is not necessarily

representative of all foreign-funded firms in China• We do believe that since approximately 30% of our

members responded (325 respondents), it is representative of our membership

• Because we ask the same questions over a period of years, our BCS allows us to track sentiment over time

China was one of the top three investment priorities for a majority of reporting American firms in 2012• Revenue growth rates slower• Profit margins still strong relative to other global markets

Human resource issues dominate list of business concerns • Top five concerns include labor costs, inconsistent regulatory

interpretation and/or unclear laws, shortages of qualified employees, shortages of qualified management, and corruption

Business Climate Survey Highlights

Economic Evolution UnderwaySigns of increasing maturity:• Services play a larger role in China’s expanding urban areas• World-class technologies are available and frequently used by a wide

range of state and private sector enterprises• Household consumption is expected to grow rapidly in the coming

years

New challenges:• Low-cost labor, net export growth will no longer be the primary drivers

of growth• Productivity must grow if China is to develop beyond middle-income

status

The Role of Foreign FirmsForeign companies can offer:• Productivity gains• Managerial proficiency• Technological expertise

Unfortunately, restrictions on foreign participation limit their ability to contribute

Implicit or explicit support to state-owned enterprises (SOEs) also hinders both domestic and foreign-owned private sector enterprises

Priority Recommendations• Investment - streamline inbound foreign investment approval

processes by allowing “encouraged” investments to be filed for the record without project and foreign investment approvals

• Standards - allow non-Chinese testing organizations to carry out testing in China

• Transparency and Engagement - allow foreign-invested enterprise (FIE) participation during the drafting of, and provide 60-day comment periods for, all draft laws and regulations

• IPR - increase transparency and openness of IP legislative and regulatory activity by allowing adequate opportunity and sufficient time to provide comments

• Chamber appreciated invitation over past year to comment on draft patent, copyright, and trademark legislation

How Foreign Firms Can Contribute• Environmental quality

• FIE participation – many foreign companies have already combated air, soil and water pollution problems aggressively over the past several decades at home, through the adoption of cleaner technologies, as well as monitoring and treatment of emission sources

• Energy use• Comprehensive oil and gas legislation making foreign

participation financially viable, including in shale oil and gas, can help further reduce China’s reliance on coal as a primary energy source

How Foreign Firms Can Contribute• Food and product safety

• Strengthening China’s food safety regime, including through a more unified set of science-based regulations, would help reduce risks to final consumers

• Moving seed production and other restricted agricultural sectors to the “encouraged” investment category would assist agricultural modernization, helping China to reach international productivity levels

How Foreign Firms Can Contribute• Healthcare and elderly care

• Higher share of the population will be of retirement age, yet traditional care-giving by family may not be sufficient

• A State Council initiative to make it easier for foreign firms to invest in this area has not been implemented, creating uncertainty and delaying foreign investment

How Foreign Firms Can Contribute• Internet speed and security

• Faster, more efficient Internet access would help China accomplish some of its own goals, including promoting consumption, helping Chinese companies become internationally competitive, and encouraging the growth of small business

• Online data security key to business confidence, strong investment in R&D

• Innovative Internet and strong IP enforcement key to innovation economy

• We encourage the adoption of international standards to facilitate joint innovation between foreign and Chinese firms, as well as full voting rights for foreign companies in standards-setting bodies, and the removal of equity caps on foreign investment in areas such as telecom

Key Domestic Reforms• Liberalizing financial markets

• Halt financial repression • Support growth of domestic demand

• State-owned enterprise reform• Private firms compete on an equal footing with the remaining

SOEs• China’s marketplace would even more competitive

DC Outreach• Conference on hot issues affecting US-China commercial relationship• Meet with US Congress and Federal Agencies to discuss current

AmCham advocacy priorities• AmCham’s President, Chairman, and members who bring a breadth

and depth of industry knowledge• Distribute White Paper to every member of congress, distributes at

the conference, and hand delivers it to every meeting conducted during the Outreach

DC Outreach• USG Meetings:

• USPTO• USDA• Commerce• EXIM• USTR• State – China Desk• State – Office of Policy Planning• USTDA• DOE• SEC• Office of Vice President & National Security Staff